Budget Tips


Ignore your checking account balance
One of the major benefits of budgeting is that you know where all your money is going, and you know how much you can spend on a certain category.  For example, I stick $20 per paycheck into a "Clothing" envelope.  When I need a couple new shirts, I check how much I've saved in that category and that's how much I can spend.

The key to doing this though, is that you need to ignore your checking account balance.  My balance may say I have over $1000 in my account, but that is deceptive.  I am saving up for many bills that are due at the end of the month (like my mortgage and electric bills).  It's dangerous to think that I actually have $1000 to spend because I might spend more than I should and not have enough to pay my bills.  The key to successful budgeting is to check the right envelope balance, not the checking account balance.


On buying a car

A car is not an investment.  It's (usually) a necessary purchase to make one's life easier.  It's also one of the most expensive purchases people typically make.  Since cars decrease in value so quickly, going into debt to buy a car is usually not a good idea.  Paying cash for a car isn't that difficult, it just takes some planning.  After you have paid off the car loan for your current vehicle, keep making that car payment, only make it to yourself.  You already have your budget worked out so you can afford the car payment, so just stick it into a savings account and organize it into an envelope in NeoBudget.  After four years (assuming you had a 4-year loan before), you will likely have enough to purchase a new vehicle with cash.  Actually, you will have a lot more than that because you'll be keeping the interest you were paying on your previous vehicle loan.

Buying a brand new vehicle is not always the best option.  The only way this could be financially the best option is if you buy a brand new vehicle and keep it until it dies (say, 15 or 20 years).  Typically, a new vehicle will lose about half of its value after you drive it off the lot.  Why not let someone else do that, and buy a vehicle that is three or four years old?  You need to be careful when buying a used car, though.  Do your research.  Consumer Reports puts out a great publication (and a great online website) that reviews various cars.  Carfax.com is a great place to look up the history of a vehicle before you buy.  And finally, kbb.com (Kelly Blue Book) is a great website to help you find the actual value of a car, so you know you're not getting ripped off.



Get receipts for some purchases
There are two people in my family who have access to our checking account: my wife, and myself.  When we first got married, I about went crazy trying to balance my budget.  I could remember well enough when I bought something at Wal-mart for $12.89 that it was actually an accessory for my computer, not groceries.  So I could remember to take it out of my "Gadgets" envelope.  But I had no idea what my wife bought.

We now have a box in our house where we stash receipts.  It took a while to get into the habit, but now whenever I buy something, I stick the receipt in my wallet.  When my wife buys something, she sticks the receipt in her purse.  Once in a while, I empty out the receipts from my wallet into this box, and she does the same.  To be honest, we don't save receipts for every purchase.  On the bank statement, it's obvious when a purchase is for gas.  There's no need to save those receipts.  It's more for the other places we shop where the purpose might be ambiguous.

Now when I balance the budget, it makes it much easier to track our spending.  We have gotten so used to this, in fact, that we frequently write on the receipts too, just to record more details about the purchase.  We will write things like "food for cook-out with family" or "present for dad's birthday."  This has made balancing our budget a breeze.


Create an "Emergency" envelope
Unexpected expenses are inevitable.  You may be driving home today and get in fender-bender.  You'd have to shell out $500, or whatever is your insurance deductible to repair your car.  This isn't something you expect to happen, but you should plan for it nonetheless.  To do this, stick $20 or $40 (or $100) out of each paycheck into an "Emergency" envelope.  Over the course of a year or two, you'll build up quite a cushion in that envelope.  This will be a buffer against unexpected expenses.

Once you really get serious about budgeting, most financial advisers recommend that you have a 3 to 6 month buffer in case you lose your job or are out of work for some reason.  This is a fantastic idea, and can be very useful.  Even if you never use it, sticking that money in a high interest savings account (like ING Direct) will earn some serious cash by just sitting there.  And you'll have the security of knowing you are not living from paycheck to paycheck, completely dependent on that next check to come in.

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What is NeoBudget?

NeoBudget is an online budget manager that uses the envelope method to help you track your spending habits and stick to a budget. You don't need to be an accountant, and you don't need to be good with numbers to use NeoBudget. It is budgeting for normal people.

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Why NeoBudget?

  • Income management- You can decide ahead of time how much money to put in each envelope from your paycheck, and it gets populated automatically each time you get paid.
  • Import transactions- Download your statement from your bank and import the transactions into NeoBudget with our Import Wizard.
  • Create your own envelopes- We give you some suggestions for envelopes, but you can create and manage your envelopes however you want.
  • No account information- We do not ask for any account information or connect directly to your bank, so there is no risk of security breach.
  • View reports- We have some advanced tools to analyze your spending and saving patterns over time on envelope or account levels.
  • Visualize virtual envelopes- NeoBudget is very visual. Envelopes are visually represented by envelope-shaped rectangles to maintain the psychological benefit of the envelope system.
  • Worksheets- Use our advanced worksheets to estimate a credit repayment schedule using several repayment methods (the "Snowball" method, or the "Highest APR First" method)
  • It's dirt cheap- It's only $2.50 per month or $12.50 for 6 months (one month free).